IDC Expects Fierce Competition in the Rack-Optimized Server Space

FRAMINGHAM, MA – FEBRUARY 5, 2001 – Rack-optimized servers are significantly outgrowing the rest of the server market, but their high growth may be a double-edged sword. According to IDC, the segment's strong performance is attracting swarms of vendors, and competition within the space is significantly heating up.


IDC estimates shipments of rack-optimized servers have increased more than 30% every quarter this year. Third-quarter revenues in this segment were an astounding 392% more than the year-ago quarter.

"The pent-up demand and rapid growth of dense server solutions is putting the spotlight on the rack-optimized space," said Mark Melenovsky, research manager with IDC's Enterprise Server Fundamentals program. "At the beginning of 2000, local assemblers with little known brands were fulfilling most of the market's demand, and very few major vendors were paying attention to this space. Today, almost every major vendor has announced or will announce additions to their rack-optimized product offerings."

In addition to the increasing number of players now crowding this market, demand is starting to soften. "The dot-com and B2B shakeout, fulfillment of thin server need, and the weakening economy are causing demand in the rack-optimized server market to shift," said John Humphreys, an analyst with IDC's Enterprise Server Fundamentals program. "While this segment will still outperform the overall server market, future growth will be more closely tied to Internet build-out, and we expect companies to take a more conservative approach to infrastructure build-out in 2001."

As competition heightens, IDC believes vendors that position their products as total solutions will have the upper hand. "Margins can no longer be maintained by building faster more robust systems with all the bells and whistles. Instead, marrying a hardware platform to the workload the server performs to optimize the solution's price performance is the key," Melenovsky said. "Vendors that highlight total solution cost savings with respect to IS personnel, deployment time, power consumption, heat generation, and space savings will have the advantage in this market going forward."

Information like the above can be found in IDC's new bulletin 2000: The Year of the Rack (Server That Is) (IDC #B23742). This bulletin examines which server vendors and products are taking advantage of the dynamic change and growth in the IT infrastructure hardware market. The bulletin looks at changes occurring in the entry-level server market, discusses trends impacting the market, and shows leading vendors’ shipment and revenue share in the rack-optimized server market. Operating system and processor brand market shares are illustrated. An analysis of the different types of products is also included. The bulletin concludes with a discussion of strategies vendors can use to best position themselves in the rack-optimized server market.

To purchase this bulletin, contact Patrick Steeves at 1-800-343-4952 extension 6787 or at

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at

IDC is a division of IDG, the world's leading IT media, research and exposition company.


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